Houses 'set back peace': Hillary Clinton

Hillary Clinton says all sides need to consider the path ahead and settlements do not help.

The United States has denounced Israeli plans for new settlements in east Jerusalem and the West Bank in the wake of a historic UN vote to upgrade Palestine's diplomatic status, calling them a setback to peace.

On Thursday, the United Nations General Assembly overwhelmingly backed a resolution recognising Palestine within the 1967 borders as a non-member observer state. Israel lashed out in response, confirming plans to build 3000 settler homes, without specifying exactly where they would be.

"In light of today's announcement, let me reiterate that this administration, like previous administrations, has been very clear with Israel that these activities set back the cause of a negotiated peace," said US Secretary of State Hillary Clinton.

"The most lasting solution to the stalemate in Gaza would be a comprehensive peace between Israel and all Palestinians, led by their legitimate representative, the Palestinian Authority," she added in an evening speech to an audience in Washington that included Israeli Foreign Minister Avigdor Lieberman and Defence Minister Ehud Barak.

"This week's vote should give all of us pause. All sides need to consider carefully the path ahead," Clinton said. "We all need to work together to find a path forward in negotiations that can deliver on the goal of a two-state solution. That remains our goal.

"If and when the parties are ready to enter into direct negotiations to solve the conflict, President (Barack) Obama will be a full partner to them."

Palestinian leader Mahmoud Abbas called for a return to peace talks, but also chided Israel's latest settlement plans.

"I've said a thousand times that we want to resume negotiations and we are ready to do it," Abbas said in New York.

"We are not setting any condition but there are at least 15 UN resolutions which consider settlement activity as illegal and an obstacle to peace which must be removed," he said. "Why do (the Israelis) not stop settlement?"

Israeli Prime Minister Benjamin Netanyahu had warned that by going to the UN, the Palestinians had violated previous agreements with Israel, such as the Oslo Accords, and that his country would "act accordingly".

- AAP